Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.

Access to a transaction account is a first step toward broader financial inclusion since it allows people to store money, and send and receive payments. A transaction account can also serve as a gateway to other financial services, which is why ensuring that people worldwide can have access to a transaction account is the focus of the World Bank Group’s Universal Financial Access 2020 initiative.

Financial access facilitates day-to-day living, and helps families and businesses plan for everything from long-term goals to unexpected emergencies. As accountholders, people are more likely to use other financial services, such as credit and insurance, to start and expand businesses, invest in education or health, manage risk, and weather financial shocks, which can improve the overall quality of their lives.
While there has been progress toward financial inclusion, significant challenges remain:

  • An estimated 2 billion adults worldwide don’t have a basic account.
  • Globally, 59% of adults without an account cite a lack of enough money as a key reason, which implies that financial services aren’t yet affordable or designed to fit low income users. Other barriers to account-opening include distance from a financial service provider, lack of necessary documentation papers, lack of trust in financial service providers, and religion.
  • More than 200 million formal and informal micro, small and medium-sized enterprises (MSMEs) in emerging economies lack adequate financing to thrive and grow.
  • MSMEs cite a lack of collateral and credit history, and business informality as main reasons for not having an account.
  • Some groups are more financially excluded than others: Women, rural poor, and other remote or hard-to-reach populations, as well as informal micro and small firms are most affected. For example, the gender gap in developing countries is estimated at 9 percentage points: 59% of men reported having an account in 2014, while only 50% of women did.
  • The forcibly displaced populations present one of the most pressing financial inclusion challenges as almost 80% in adults in Fragile and Conflict-Affected States are outside the formal financial system.
Financial inclusion is becoming a priority for policymakers, regulators and development agencies globally:
Since 2010, more than 55 countries have made commitments to financial inclusion, and more than 30 have either launched or are developing a national strategy. Our research indicates that when countries institute a national financial inclusion strategy, they increase the pace and impact of reforms.

Countries that have achieved the most progress toward financial inclusion have put in place an enabling regulatory and policy environment, and have encouraged competition allowing banks and non-banks to innovate and expand access to financial services. However, creating this innovative and competitive space has to be accompanied by appropriate consumer protection measures and regulations to ensure responsible provision of financial services.

Digital financial technology, or “fintech,” and particularly the global spread of mobile phones, has facilitated expanding access to financial services to hard-to-reach populations and small businesses at low cost and risk:

  • Digital IDs make it easier than ever before to open an account
  • Digitization of cash-payments is introducing more people to transaction accounts
  • Mobile-based financial services bring convenient access even to remote areas
  • Greater availability of customer data allows providers to design digital financial products that better fit the needs of unbanked individuals
As countries have accelerated efforts toward financial inclusion, it has become apparent that they face similar hurdles which impede their progress. These include:
  • Ensure financial access and services extend to hard-to-reach populations, including women and the rural poor
  • Increase citizens’ financial literacy and capability so they understand different financial services and products
  • Make sure everyone has valid identification documents, and a low-cost, accessible means for them to be authenticated
  • Devise useful and relevant financial products, tailored to consumer needs
  • Establish robust financial consumer protection frameworks, and adapt relevant regulatory and supervisory authorities, including by utilizing technology to improve supervision (so-called “regtech”)
  • Globally, a lack of identification cards makes it hard to open a bank account, access capital and credit.

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